most banks are keeping budgets flat , Standard Chartered is upping spending 7 per cent this year. David Awcock, group head of technology at the firm, chats with Business Today.
Take us through your priority areas in terms of IT investments this year.
The bank has a long-term investment strategy. We have been investing very heavily in building our global financial markets capability - this is about trading, foreign exchange, things that we can do on a global markets type operations. Historically, we weren't quite large in this and we have invested significantly here.
We are also investing in commercial banking, into our securities business, trade business and into our cash management business. In each of those cases technology is really a key driver. On the consumer side, our target markets are in the higher value segments. We have seen through the first economic crisis very well and we are continuing to invest unlike others.
Since you have a large captive in India, how do you use third party IT services providers?
We use IT services vendors to do large turnkey projects where we think they can add value. TCS, for example, is developing a product for us that would be rolled out globally in 25 to 30 markets. The product would enable securities trading, securities funds management, securities custody etc. This is a $30-40 million investment. We are in the first stage of delivery.
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Then, we also use IT services providers to manage and run our data centre and our international telecommunication networks. We don't rely on just one vendor. We have a huge 'do it ourselves' strategy and therefore all service providers have to compete with our own internal capability.
We certainly consider technology to be a very core IP for us. We are probably one of the very few banks in the world to build our own core banking system in 2006-07. We built it from scratch and now it is used in 40 countries. It is as advanced as you would find anywhere.
Why did you have to build your own core banking system when there were good banking software solutions already available in the market from Infosys and Oracle? Was it a cost consideration?
We compared the prototype we developed with Flexcube (Oracle) and Finacle (Infosys). Our evaluation showed us that in the long-term, it would be more cost effective to run it ourselves. We felt it would be a source of long-term advantage. Certainly, some questioned that even within the organization. But it has worked well. Everybody realised that your dependence would have transferred to a third party. We now have a team of 400 people who work on the product.
Post Lehman, we saw a number of IT captives owned by multinational banks being hived off. Did you deliberate selling your Chennai operations?
We will never sell our captive. It is a source for competitive advantage. An asset sale will give you a one-off payment. Our bank has been very successful. Over the last eight years, we have delivered record profits every year.
We are under no pressure to monetise something that is of great value to us. However, one could never say never. But under the current CEO and myself, it is something we would not even consider. Many people knock on our doors asking us to consider a sale and I give them the same answer I am giving you.
Give us a sense of your IT budgets this year.
It is higher than last year - about 7 per cent. But this also incorporates a degree of flow through of investments already made. Is there a big jump? No. Do I see steady investments in the future? Yes. We are cautiously optimistic about the bank's future.